updated 08:20 am EDT, Thu April 14, 2011

Reuters reports Amazon to engage in private talks

Amazon is reported to be meeting with angry music label bosses to hash out a deal on its new streaming Cloud Drive digital music locker service. Parties at the table are expected to include Universal Music, Sony Music, Warner and EMI. Amazon had maintained at launch that its existing licence to sell music downloads permitted it to allow customers to store and stream music purchased through its site to mobile and other devices. However, record labels contend that the Cloud Drive service should be subject to a music streaming licence.

At this early juncture, Amazon's Music team are reporting that the new service has helped boost the income of labels as more customers have been purchasing music and storing their files in their new Cloud Drive. However, this is unlikely to shift the perspective of the labels who want to protect their ability to charge a separate licence fee for the streaming of music in their respective catalogs. From their perspective, Amazon's service is using a loophole to by-pass the payment of additional fees owing to them. This could of course encourage copycats to adopt a similar tact, which is something the labels are obviously keen to avoid.

"We don't publicly discuss our meetings with partners, and we have not announced any changes to Amazon Cloud Drive or Amazon Cloud Player since the launch," said Amazon spokeswoman Cat Griffin speaking to Reuters.

Currently, users can get 5GB of space for free but get an incentive to upgrade early. Anyone who buys an Amazon MP3 album in 2011 is automatically upgraded to 20GB of space for the year from the sale. The extra capacity would otherwise cost $20 per year. Tiers exist to provide 50GB, 100GB, 200GB, 500GB and 1TB, all of which cost $1 per year for every gigabyte of storage.

While it is likely that Amazon will be able to strike a compromise deal with the labels, it is unclear how this would affect its pricing model. The questions will be can Amazon absorb any additional costs? Or, will any deal result in consumers paying more for music that would other wise be able to play repeatedly without additional charges when downloaded directly to their own devices?